Speaker 1: Virus plans sixty six billion dollar takeover it's American rival,
Speaker 1: seeds giant Monsanto, is likely to be delayed until early
Speaker 1: eighteen as talks with regulators intensified. The merger would create
Speaker 1: the world's largest integrated pesticides and seeds company. European antitrust
Speaker 1: regulators opened a comprehensive investigation into the deal in late August.
Speaker 1: Liam Condon, chief of Buyer Crop Science, says he's very
Speaker 1: confident the deal will ultimately go through based on the
Speaker 1: tenor of negotiations so far. Joining us as Jennifer Ree,
Speaker 1: senior litigation analyst for Bloomberg Intelligence, jen what are the
Speaker 1: concerns were the merger like this in the midst of
Speaker 1: an unprecedented wave of consolidation in the agro chemicals industry. Well,
Speaker 1: I mean you just said it. That's the first thing.
Speaker 1: You have a lot of consolidation in the industry, and
Speaker 1: of course this is more and both in the US
Speaker 1: and and the U, there are concerns about farmers, which
Speaker 1: are the primary customers of all of these companies down
Speaker 1: DuPont that just merged now Buyer Monsanto, as well as KEM,
Speaker 1: China and Cygenda. So you know, what the EU is
Speaker 1: concerned about are some overlaps between these two companies, Buyer
Speaker 1: and Montanto in a couple different kinds of pesticides UM
Speaker 1: as well as in some seats UM, as well as
Speaker 1: the possibility that this combined company could bundle these products,
Speaker 1: both of which are sold to farmers, and there could
Speaker 1: be some harm that could come out of that ability.
Speaker 1: So Jen, what is Buyer going to do with this
Speaker 1: extra time, as it were, this delay in the takeover?
Speaker 1: You know, I suspect and this is obviously just speculation
Speaker 1: that what is happening is that they are working now
Speaker 1: on negotiating remedies that they will have to agree to
Speaker 1: with the EU in order to be able to close
Speaker 1: their deal, and that they are they've decided that it's
Speaker 1: worth it to them to have a little extra time
Speaker 1: to try to make some arguments to limit what the
Speaker 1: European regulators require them to sell off. And it's clear
Speaker 1: they're going to have to sell assets, and they may
Speaker 1: be simply trying to limit what it is they have
Speaker 1: to sell there. And while they're discussing remedies with the regulators,
Speaker 1: they're also holding talks with potential acquirers about some assets
Speaker 1: that they may need to divest. It doesn't seem pretty
Speaker 1: certain that the EU is going to require some substantial divestments. Oh,
Speaker 1: I think so absolutely. You know, when they go into
Speaker 1: a phase two, and then in particular, we know that
Speaker 1: some assets were offered up early on during the Phase
Speaker 1: one by Buyer in in the European Commission rejected that package.
Speaker 1: So we do know that they expect investitures, and I
Speaker 1: think it will be extensive. They did require down and
Speaker 1: do Pont to divest assets um not seeds, but several
Speaker 1: assets in the pesticide area, as well as Keim China
Speaker 1: and Cententa to divest some chemicals in order to close
Speaker 1: and I think we should expect that plus seeds and
Speaker 1: maybe more. Here jen Uh Buyer is, you know, seeking
Speaker 1: clearance from a lot of authorities around the globe who
Speaker 1: have oversight of this kind of deal and various different
Speaker 1: countries all over the world. If they get the EU
Speaker 1: on board with whatever divestment they have to make, will
Speaker 1: everything else fall into place or are they going to
Speaker 1: have to deal similarly with other authorities? You know, it's
Speaker 1: a good question. That is what usually happens, and that's
Speaker 1: generally what happened in the Dow DuPont deal because in
Speaker 1: that case, the European regulators required global divestitures by the company,
Speaker 1: not not just divestitures that would have sold assets sold
Speaker 1: within the European Union. So depending on what the EU
Speaker 1: asks for here, if it's again this global remedy so
Speaker 1: that it will cure concerns of other regulators, things might
Speaker 1: just fall into place without any other regulators asking for
Speaker 1: much more. But if not, other regulators could you know,
Speaker 1: ask for certain smaller divestitures that might particularly affect the
Speaker 1: cut consumers in their region. Buyer has sought clearance from
Speaker 1: almost all of the roughly thirty authorities who have oversight
Speaker 1: of the deal, and has received approvals from more than
Speaker 1: one third of them. Does that seem low to you
Speaker 1: when Buyer had previously said it expected to get approvals
Speaker 1: to complete the transaction by the end of the year,
Speaker 1: You know, it does actually seem a little bit low.
Speaker 1: But sometimes what happens is some of the jurisdictions will
Speaker 1: hang back and wait for sort of the the bigger jurisdictions,
Speaker 1: the more key jurisdictions like the US, China, Europe, to
Speaker 1: see what they're going to do in terms of the remedy.
Speaker 1: They know there will be a remedy here, and they
Speaker 1: want to hang back and see what that remedy is
Speaker 1: going to be, um to understand whether or not they
Speaker 1: might need something more to protect consumers in their regions.
Speaker 1: So I think what's holding things up here is likely
Speaker 1: the EU, which is really dragging here, as well as
Speaker 1: the US. So jen assuming that uh, in fact, buyer
Speaker 1: does have to divest a number of different things, and
Speaker 1: they are in fact already talking, it sounds like to
Speaker 1: some of the some of the potential acquirers, what can
Speaker 1: we expect them to be vesting? What you know? Generally speaking, Well,
Speaker 1: we do know from a press release that was issued
Speaker 1: by the European Commission that there is a problem with
Speaker 1: herbicides or beside is one kind of pesticide. The herbicides
Speaker 1: essentially kill weeds, and in this case, mont Santo has
Speaker 1: a product called Roundup and that overlaps with a product
Speaker 1: that's sold by buyer, So it's very likely in that
Speaker 1: area they're going to have divestitures. They also noted that
Speaker 1: is the European Commission noted that there were seed overlaps,
Speaker 1: particularly in oil seed rape seeds. And we also know
Speaker 1: there's probably a problem with cotton seeds in the US
Speaker 1: because when mont Santo acquired a company called Delta and
Speaker 1: pine Land several years ago, they had to sell off
Speaker 1: Delta and pine Lands cotton assets and they sold it
Speaker 1: to Buyer. So at this point, there's no way that
Speaker 1: buyer is going to have to be able to, you know,
Speaker 1: combine those seeds again, those cotton seeds, so they'll likely
Speaker 1: have to sell cotton seeds as well. Jen why this
Speaker 1: wave of consolidation in the agro chemical industry, Well, you know,
Speaker 1: it's likely that that's also a good question, and an
Speaker 1: industry analyst could probably tell you more. But one of
Speaker 1: the things we're seeing is that there is a lot
Speaker 1: of need for innovation and R and D to you know,
Speaker 1: to to meet rising demand, to deal with climate change
Speaker 1: things like that that affect crops and affect the growth
Speaker 1: of crops and our food supply. And it takes a
Speaker 1: lot of money, a lot of capital, and and a
Speaker 1: lot of scale to conduct the kind of R and
Speaker 1: D that's needed. And that's exactly what Buyer and Monsanto
Speaker 1: is arguing here that in order to conduct the kind
Speaker 1: of innovation that they need to and R and d
Speaker 1: going forward, they're going to be able to do that
Speaker 1: much better off combined rather than individually. So can we
Speaker 1: expect that this is gonna keep happening as throughout the
Speaker 1: entire industry? Well, we may be. We may see it
Speaker 1: continue to happen. I think one of the interesting things
Speaker 1: that that could happen here though, because I was reading
Speaker 1: an article today about B A. S F as one
Speaker 1: of the possible buyers of the assets to be divested
Speaker 1: by buyer in mont Santo, and the fact that the
Speaker 1: company may be interested in both seeds and chemicals, and
Speaker 1: B A. S F is a company that now has
Speaker 1: chemicals and not seeds, So actually that sort of adds
Speaker 1: to diversification here. It's sort of is a lessening of
Speaker 1: consolidation if we add another combined seed chemical company into
Speaker 1: the mix, because now you'll have four sort of big
Speaker 1: combined seed chemical companies rather than three. We keep hearing
Speaker 1: about the EU and the Commissioner, Margaret the Stayer, is
Speaker 1: the EU seen as the toughest of the regulators? Well,
Speaker 1: you know, I think right now, yes, and I think
Speaker 1: that the US was considered pretty tough too. But now
Speaker 1: we're in this transition stage and we still don't really
Speaker 1: know what's going to happen going forward with the anti
Speaker 1: trust agencies. Were still down three commissioners at the FTC.
Speaker 1: We still don't have the head of the Antitrust Division
Speaker 1: at the Department of Justice confirmed um appointed, but not confirmed,
Speaker 1: And so we don't know what the trend is going
Speaker 1: to be. But but most people think it's likely that
Speaker 1: going forward in the next few years, the EU will
Speaker 1: be the toughest on antitrust. Always great to have you on.
Speaker 1: That's Jennifer Reaching, your litigation analyst for Bloomberg Intelligence. You
Speaker 1: can read more of Jennifer's analysis by going to be
Speaker 1: I go on the Bloomberg terminal